Net Neutrality is About Consumer Welfare not Corporate Welfare for Netflix

Billionaire Netflix CEO Reed Hastings objects to Netflix having to pay anything at all for Netflix’ gorging on 30% of the Internet’s North American bandwidth. In a Netflix corporate blogpost billionaire Reed Hastings rails against the perceived injustice of Netflix paying Internet usage-based pricing like consumers do.

At core, Mr. Hastings now derides traditional consumer-defined net neutrality, which ensures consumers the freedom to access the legal content of their choice – as “weak” net neutrality.

Meanwhile, he is attempting to rebrand his new self-serving, corporate-defined net neutrality, which ensures the largest corporate users of the Internet pay nothing for their largest usage of interconnection bandwidth — as “strong” net neutrality.

Strong net neutrality additionally prevents ISPs from charging a toll for interconnection to services like Netflix, YouTube, or Skype, or intermediaries such as Cogent, Akamai or Level 3, to deliver the services and data requested by ISP residential subscribers. Instead, they must provide sufficient access to their network without charge. [Bold emphasis added.]

Simply, Mr. Hastings’ self-serving position here is that large Internet corporations not only should not have to pay for any usage-based Internet interconnection, they should not have to pay anything at all!

Netflix’ position is that users should fund the full cost of the Internet’s infrastructure, while the largest Internet corporations which profit the most from the Internet are entitled to an official special-interest pass on corporate responsibility.

Most simply, Netflix demands that large Internet corporations be entitled to use and profit from the Internet for free, while consumers and ISPs pay their tab.

Anyone who thinks about it appreciates that the Internet operates over very expensive high-tech infrastructure that constantly needs upgrade to handle exploding usage. Someone has to pay for it, it is not free.

Like any other market, Internet users can buy different types of Internet access based on their different needs, wants and means. Specifically, a consumer can buy the speed and mobility they want and the amount of usage they want to consume. And like any other rational economic market, those that use more, pay more.

Give Mr. Hastings credit where credit is due, he has a lot of gall. His concept of “strong” net neutrality is that the corporation that uses the most Internet bandwidth, his, with a whopping 30%, should pay the least.

Moreover, under Mr. Hastings “strong” net neutrality vision, corporations may charge consumers for their Internet usage, but may not charge other corporations for their usage. Here Mr. Hastings employs self-serving, pejorative terms like “toll” and “arbitrary tax” to distract people from the fact that what we are really talking about here is simply a price for value received.

It will be telling to see if any consumer groups support Netflix’s anti-consumer position. And if some do it will be telling how they square that circle with their consumer clients.

In sum, this whole issue is actually very simple. For two decades of exponential growth, the Internet backbone market has flourished spectacularly without government regulation.

Internet backbone interconnection pricing is largely based on volume of exchanged traffic (usage) by ISPs, the largest Internet companies and intermediaries. Consumers, both individuals and businesses, also pay for their Internet based on usage. Why now should Netflix and other big Internet corporations be granted a regulatory special exemption from Internet usage pricing at the expense of consumers and other businesses?

Consumers know the old adage — you get what you pay for. Somehow Netflix imagines it is owed whatever they want — and it does not have to pay anything for it.

Scott Cleland is a precursor: a proven thought leader with a long track record of industry firsts. Cleland is President of Precursor® LLC, a Fortune 500 research consultancy specializing in the future of Internet competition, property rights, privacy, cyber-security and cyber-ideology; algorithmic markets; and communications competition and de-regulation. Cleland authors the widely-read PrecursorBlog and serves as Chairman of NetCompetition® a pro-competition e-forum supported by broadband interests. A world-leading research authority on Google, Cleland authored the book: Search & Destroy: Why You Can't Trust Google Inc. and is publisher of the watchdog site Google Monitor.
Cleland served as Deputy United States Coordinator for Communications and Information Policy in the George H. W. Bush Administration. Eight Congressional subcommittees have sought Cleland’s expert testimony and Institutional Investor twice ranked him the #1 independent analyst in his field. Scott Cleland has been profiled in Fortune, National Journal, Barrons, WSJ’s Smart Money, and Investors Business Daily. Ten publications have featured his op-eds. For a full bio see: www.ScottCleland.com.

I dont know how you could pull this out of your A**. Consumer pays ATT/Comcast or any other ISP for the bandwidth and usage. Netflix pays its own ISP for their bandwidth and usage. Why would netflix pay for ATT/Comcast again?

Roger Williams

Well said, and any extra fee charged to Netflix would also be passed on to their customers, this negating the imaginary positive to consumers

NWO6b2die

The “Somewhat Reasonable-ity” of Lakely’s perceived evils of Netflix against its consumers is ridiculous on its face but totally understandable, based upon his ‘prior’ history with the “old media” news agents, who have been his masters, which he lists above. The likes of the 1% Club,such as Disney and IMdb3 & others, do not want NETFLIX’s competition in the online Entertainment industry ~~Period. In the mean time THEY would attempt to Tax Netflix out-of-business. Business as usual for these Jokers!